What Are the Ramifications of a Short Sale Buyer?

A short sale is a situation where a property's seller needs to sell and the sale proceeds aren't sufficient enough to pay off the existing mortgage. Find out about the ramifications of a short sale with help from an experienced real estate professional in this free video clip.

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Hi, it's Angela Rose with angelaroserealestate.com. What are the ramifications of a short sale buyer? Now a short sale is a situation where a property's seller needs to sell and the sale proceeds aren't sufficient enough to pay off the existing mortgage. So it's basically an alternative to foreclosure. The term short sale or short pay refers to a process whereby the mortgage company must agree to a reduced payoff in order for the sale to take place. All the sale costs must be included and the seller receives nothing except debt relief and not having a foreclosure on their credit record. Now of course everybody wants a bargain, especially in this market, but the truth is that many bargains go to the investors and the people inside the industry because they can handle all the hiccups better than owners who plan to occupy the property. Now whether it's a short sale or a foreclosure or an estate sale, you can expect something to go sideways in a short sale and often times you can't get it to go perfectly straight so there's a couple things you need to look out for. The first is that the closing date may be delayed. In fact you can pretty much count on it. For someone who's trying to coordinate a move this can really wreak havoc on your life. If you're trying to link together the sale of your house with the purchase of a short sale, good luck on that one. If you're trying to give notice to your landlord and be able to move into the short sale property on a firm date, not always a reasonable expectation. Most often short sales involve a series of extensions strung together until it closes. If someone's not planning to live in the house, such as an investor, it's not a big deal. But for someone who's trying to own it as a primary residence, as an owner occupied, it can be a nightmare of uncertainties. So number two, when the bank doesn't always approve the sale price. One of the hardest things to understand about a short sale is that the buyer and the seller agree to the price but the bank is the one calling the shots. Even if you get the okay from the bank the road can still be very bumpy until the end. So let's say now the buyer wants to walk through the property the day of the signing, the day of the closing, the utilities might be shut off. Anyone who can't make their mortgage payments, who's potentially not living in the house, isn't likely to keep the utilities current during the approval process. So obviously the buyer's going to want the utilities on for the final walk through. But getting them turned on is easier said than done. All these questions. Whose name is it? Did they get them turned on? If it's closing in the buyers name in three days they likely don't want the utilities in their name yet. In fact the utility companies may not even let a none owner put the utilities in their name. So it's definitely clearly not something a lawyer would advise a buyer to do prior to closing. Now also the seller isn't forking out any money to get the utilities turned on. They have no proceeds. They're not putting any money into the house. And the same thing goes for repairs. You walk through, you see something wrong with the house and you want the seller to get it fixed, now typically that's not going to happen. So there could be a lot of headaches potentially, a lot of uncertainties, and the truth is investors they foresee all of this. They don't care as much about the mundane things like what date it'll close or making repairs. They're going to gut the whole house potentially anyway. So the next time you wonder why investors and insiders always seem to get the best deals on these short sales you can ask yourself, is it worth the headache? And that's what are the ramifications of a short sale buyer. I'm Angela Rose of angelaroserealestate.com.